After a sharp drop of 14.3% in exports to the United States, South Korea plans to start trade negotiations with the US this Thursday.

South Korea and the United States will start trade negotiations this week, with South Korea, a strong exporter in Asia, trying to convince the Trump administration to reduce punitive tariffs that are starting to impact the economy. US Treasury Secretary Scott Bensant and Trade Representative Jamie Grillet will meet with South Korean Finance Minister Choi Sang-mook and Minister of Industry, Trade and Resources An Deok-geun at 8 am local time on Thursday in Washington. Acting South Korean President Han Deok-soo said in a discussion with key aides on negotiating strategy that they will seek a win-win solution through calm and serious negotiations. South Korea's export-dependent economy is vulnerable to the impact of Trump's aggressive import tariffs, as preliminary trade data released on Monday showed that a prolonged trade war could cause significant damage to this fourth largest economy in Asia. The preliminary trade data showed a 14.3% decline in South Korean exports to the US in the first 20 days of April. Achieving trade concessions from the US is crucial to stabilizing the South Korean economy. The political crisis sparked by the failure of former President Yoon Suk-yeol's attempt to declare martial law continues to escalate, and South Korea will hold early elections on June 3 after he was impeached and removed from office by the National Assembly. It remains uncertain how far the acting president can push the negotiations during this period of transition of power. Currently, the leading candidate in the opinion polls is Lee Jae-myung from the main opposition party, the Democratic Party of Korea. South Korea and Japan are among the first countries to engage in trade negotiations with the US. Other countries are preparing to reach agreements to lower import tariffs and will closely watch the outcome of the negotiations to understand what concessions Trump will attempt to force these countries to make. South Korea, an important ally of the US, is subject to a 25% comprehensive tariff, which has been temporarily reduced to 10% for 90 days. Like other countries, South Korea's automobiles, steel, and aluminum products also face a 25% tariff. Economist Hyosung Kwon said, "Assuming the current tariffs remain unchanged, we estimate that trade impact could lead to a GDP decline of up to 0.7% by 2028. Fiscal support measures may help mitigate the impact, but cannot completely offset it. We currently anticipate economic growth in 2025 to slow down from 2.0% in 2024 to 1.0%, lower than our forecast of 1.5% in January." The South Korean government has been reviewing multiple proposals to reduce the trade surplus with the US. In 2024, South Korea's trade surplus with the US increased by about 25% compared to the previous year to reach $55.7 billion. Shipbuilding cooperation, the Alaska Pipeline project, and sharing defense costs are among the issues that may be discussed at the negotiating table. Early trade data shows a 5.2% year-on-year decline in overall exports for South Korea in the first 20 days of this month. Analyst Cho Chuel from the Korea Institute for Industrial Economics and Trade pointed out, "These data seem to reflect that businesses are taking a wait-and-see approach as the government tries to negotiate lower tariffs." He also added that depending on the progress of negotiations, the data may further decline or reverse. In the political vacuum, companies like Samsung and Hyundai in South Korea are accelerating their announcements of investment plans in the US to seek tariff exemptions. Pohang Iron and Steel will invest in a stake in Hyundai Motor Group's steel plant project in Louisiana. Although the Bank of Korea maintained its benchmark interest rate at 2.75% last week, it warned of increased downward risks to growth due to trade policy. The bank warned that the economy may experience negative growth in the first quarter.